USD

  • The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement. The Dot Plot still showed three rate cuts for 2024 and the economic projections were upgraded with growth and inflation higher and the unemployment rate lower.
  • The US CPI beat expectations for the third consecutive month, while the US PPI came in line with forecasts.
  • The US NFP beat expectations across the board although the average hourly earnings came in line with forecasts.
  • The US ISM Manufacturing PMI beat expectations by a big margin with the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to the lowest level in 4 years.
  • The US Retail Sales beat expectations across the board by a big margin with positive revisions to the prior figures.
  • The market now expects the first rate cut in September.

EUR

  • The ECB left interest rates unchanged as expected and opened the door for a rate cut in June.
  • The recent Eurozone CPI missed expectations.
  • The labour market remains historically tight with the unemployment rate hovering at record lows.
  • The latest Eurozone PMIs beat expectations on the Services side while the Manufacturing one missed dropping further in contraction.
  • The market expects the ECB to cut rates in June.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis
EURUSD Daily

On the daily chart, we can see that EURUSD broke the key 1.07 support and extended the drop into the 1.06 handle as the divergence between the Fed and the ECB became stronger. From a risk management perspective, the sellers will have a much better risk to reward setup around the 1.07 handle where they will find the confluence of the 38.2% Fibonacci retracement level and the moving averages. The buyers, on the other hand, will need to break above that resistance zone to start targeting new highs.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see that the price has started to diverge with the MACD around the 1.06 handle. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback after such a huge selloff. The buyers might start to pile in around these levels with a defined risk below the 1.06 handle to position for a rally into the 1.07 resistance.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see more clearly the divergence with the MACD and we can also notice that the recent price action formed what looks like a descending triangle. The price can break on either side of the pattern but what follows next is generally a sustained move in the direction of the breakout. In this case, if we get a break to the downside, we can expect the sellers to increase the bearish bets and take the pair into the 1.05 handle. On the other hand, if we get a break to the upside, the buyers should increase the bullish bets into the 1.07 resistance.

Upcoming Events

This week the only notable report left is the US Jobless Claims figures tomorrow.

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